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Banking Newsletter - December 2012

We cover regulation, customer/channel trends, ATO liquidity charges, consumer protection, Sibos conference and results from major banks and mutuals.

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Banking Newsletter - December 2012

Young professionals: A wake up call for retail banking 

As young professionals become a key demographic driving the bottom line, retail banks need to continually rethink the way they attract and retain customers or risk being left behind.

If you think of customer demographics as a ‘pipeline',  you can picture a young person entering the pipe and passing through life phases such as consumer, saver, borrower and investor.

 

With this in mind, it's clear that young professionals joining the workforce today will drive retail banking revenues tomorrow. Getting what this group wants ‘right’ will differentiate the winners and losers in retail banking. A study by KPMG in Australia provides insights into what tomorrow’s sophisticated banking customers will expect.

 

KPMG surveyed 1300 plus 18 to 24 year-olds working at the firm nationally. The research explored how this demographic feels about their branch banking, social media, and what a 'great bank' would look like.

 

The future of branches
Just 10 percent of survey respondents ranked a branch among the three ways they would like to interact with their bank. One in five actually said they cannot see themselves ever using a branch in the future. Convenience drove this response, since time-strapped young professionals find branch banking too time-consuming.

 

But will consumers really deposit their money or discuss complex products with a bank that lacks a 'high street' presence? When KPMG pursued these themes, we found that young professionals are not concerned whether their bank had a physical location. Instead, they are drawn by the quality of a bank’s digital capabilities. And when it comes to discussing complex financial matters, they prefer for the “bank to come to me, at work or at home.”

 

Bankers as social media gurus?

While this demographic loves social media, our research revealed the contrary when it comes to banking. Sixty-five percent of respondents said they would not want their bank to interact with them through social media (another 20 percent said they were 'unsure'). “Social media is leisure… I want to separate my personal and business life,” observed one study participant.

 

The great bank of the future
When asked what a “great” bank looks like, this demographic emphasised security, low cost and a great customer experience ⁹ with a few twists on these traditional retail banking value drivers:

 

  • Security: Young professionals embrace technology, but are concerned about security. Recognising the data privacy and fraud risks of online and mobile payments technology, they place value on a bank that can address this. A "great bank" will ensure robust security, for competitive advantage.
  • Low cost: This generation shows great price sensitivity, albeit in unconventional ways. Just 1.6 percent expect low or no-fee accounts at a great bank. Thirty-six percent of respondents rated unfair fees as a major determining factor in what a 'great' bank of the future would look like. What this tells strategists is; young professionals are rational, they understand that they have to pay fees for the service being provided to them, but they do not want to pay for what they perceive to be 'unfair' fees. In the context of the competitive retail banking landscape, this could potentially be a lever for gaining market share.
  • Customer experience: Young professionals believe a great customer experience goes beyond simply 'getting it right' and 'being nice'. A 'great bank' is proactive and delivers services outside the branch, with direct and convenient access to teams of knowledgeable staff, familiar with products and client needs. They desire simple, self-service solutions that share insights and information held by the bank.

 

As young professionals become a significant revenue driver, retail banks must consider their distinctive priorities and preferences. Listening to the voices that echo from the demographic pipeline will differentiate a great bank of tomorrow from those that will be left behind.

 

Daniel Knoll

Daniel Knoll
Partner and Retail Banking Centre of Excellence Leader

+61 2 9455 9148

danielknoll@kpmg.com.au

Bernie Crowe

Bernie Crowe
Director, Business Performance Services

+61 2 9335 7667

berniecrowe@kpmg.com.au

Gaelan Bloomfield

Gaelan Bloomfield
Senior Consultant,
Business Performance Services

+61 2 9335 7770

gbloomfield@kpmg.com.au

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